May. 22, 2014 - 07:07PM
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Army & Air Force Exchange Service's Summer 2014 catalog. (AAFES)

Army and Air Force Exchange Service officials have submitted a formal proposal to defense officials asking for authority to expand exchange online shopping privileges to all honorably-discharged veterans, according to AAFES director Tom Shull.

The proposal was submitted May 14.

Information was not immediately available from defense officials about whether they are considering the proposal, or if there is a timeline for a decision.

AAFES contends that the plan would require only a “modest change” to DoD policy, and would not require a change in law, Shull said.

Marine Corps Exchange officials have provided their response on the issue to Navy officials, but a copy of the response was not immediately available. Navy Exchange Service Command officials have not received requests for input from Navy or DoD officials, said spokeswoman Kathleen Martin.

“Why not give them a modest benefit to honor their service?” Shull said in a May 21 interview, publicly acknowledging AAFES’ efforts as reported April 29 in the Military Times online.

About 90 percent of honorably discharged veterans left serice before qualifying for retirement benefits and thus are excluded from exchange shopping privileges, Shull said, a group that now includes many veterans who have deployed four, five or more times to war in the last 13 years.

Expanding the shopping privileges would be “a limited benefit to all honorably-discharged veterans,” Shull said, adding that the profits that could be generated by this increased customer base would help the active-duty and retired community in several ways.

“The earnings that will be generated will be used to improve the brick-and-mortar exchange benefit,” he said, as well as provide more money to morale, welfare and recreation programs on military bases.

AAFES’ online sales currently total about $200 million a year; officials predict that with the expanded shopping population, sales could reach $1 billion a year within five years. AAFES officials estimate 20 million additional veterans would be potentially eligible to shop at the exchange online site.

“There are no losers in this,” Shull said. “It’s important to note that it’s just online. We just have to scale up to the demand. That’s a good problem to have.”

Over time, the expansion could create another 1,500 jobs at AAFES, he said.

Officials are improving the current Exchange online shopping site, he said, relaunching with a new platform in July that will provide more predictability for customers that items will be available, easier navigation and fewer clicks to checkout, as well as same-day shipping for many items.

Improving the website has been a major priority for Shull since he took over as director of AAFES. He has led restructuring efforts to make the organization more efficient; by the end of this year, AAFES will have about 5,000 fewer positions than the 42,000 that existed when he arrived nearly two years ago. Those eliminated positions were primarily at the headquarters level in an effort to cut overhead costs, mostly through a hiring freeze, attrition and early retirement programs.

But if further restructuring is needed because of less revenue from fewer shoppers as a result of more military force structure cuts, “we’ll have to cut muscle ... we don’t want to do that,” Shull said, adding that he wants to ensure there are enough sales associates in the stores, and enough employees serving meals in the food courts, for example.

Part of AAFES profits go to support morale, welfare and recreation programs on installations, which Shull noted are under tremendous budget pressure. He said AAFES officials believe there will be more pressure for the exchange system to take on more of the funding burden because they believe the Pentagon budget will shrink further.

“MWR is coming to us for more money,” he said. “We’ll be under pressure to do more.”

Former Sergeant Major of the Army Ken Preston, who supports the idea of expanding the online shopping base, said there was a concern that some would see the idea as an erosion of benefits for current shoppers. “But once you explain that there won’t be shoppers flooding the [brick-and-mortar] stores, they understand,” he said.

Preston, who serves on the Army chief of staff’s retiree council, said the idea has been presented to the council and to others, and “they see the value.”

That connection to the exchange is important, and could send a message to those who have served honorably. Under the Army’s Soldier for Life program, Preston said, the idea is to look out for the soldier not only while he or she is serving, but to stay connected when the soldier makes the transition out of the Army.

“Because of your honorable service, you continue to be part of our alumni,” said Preston, who was the Army’s top senior enlisted adviser from January 2004 until March 2011.

Allowing all those who honorably served to shop online is one way to mitigate the financial impact of a shrinking shopping base, he said.

As a former member of the AAFES board of directors during his tenure as Sergeant Major of the Army, and as a current member of the exchange’s retiree advisory council, Preston said he has gained an understanding of the AAFES business model and its contributions to MWR programs.

“MWR dollars are very important, especially now as budgets get tighter. Garrison commanders will have to prioritize what they spend money on, and I worry about the programs that don’t generate revenue,” such as child and youth services, Preston said.